News of the World Phone-Tapping Scandal

For my PR Case Studies course, my partner Audra and I co-authored this public relations case analysis of the Rupert Murdoch News of the World Corrupt Phone-Tapping Practices, which garnered huge US media attention in the summer of 2011.

Tapping into Scandal

ABSTRACT

In the summer of 2011, Australian-American media mogul and chairman and CEO of News Corporation, Rupert Murdoch, faced the biggest public relations crisis of his 60-year media career. On July 10, 2011, following accusations of illegal phone hacking and police bribery, Murdoch stopped production of the News of the World, a weekly British tabloid paper that had been in production since 1843. Among the alleged phone-tapped victims were celebrities, politicians, high-profile police investigation subjects, and members of the British royal family. This case analysis delves into the intricate web of events that culminated in the tarnished reputation of the media magnate.

BACKGROUND

A Mogul is Born

Keith Rupert Murdoch was born in 1931 into an established journalistic family in Melbourne, Australia. His father, Sir Keith Murdoch, was a distinguished war correspondent who later began a regional newspaper called News Limited, which was later inherited by Rupert Murdoch in 1953 and expanded into the $30 billion media conglomerate, News Corporation (McKnight, 2010).

In 1969, Murdoch expanded the Australian news company into the United Kingdom, and acquired the News of the World, The Sun, and The Times. In the mid-1970s, Murdoch relocated to New York City and became an American citizen by 1985. Shortly after, he decided to move in on the American market and acquired The Wall Street Journal, Twentieth Century Fox, and HarperCollins Publishing (Wolff, 2008).

By the beginning of 2000, the News Corporation owned roughly 800 companies in over 50 countries, and was then valued at around $5 billion. Presently, News Corporation is valued at about $30 billion, and its product list includes newspapers, magazines, books, movies, sporting events, websites, cable programming, and satellite television.

Skeletons in the News Corp Closet

In 2011, Murdoch faced the biggest public relations crisis of his career when he and his employees were accused of hacking into the phones of politicians, celebrities, the British royal family, and the families of high-profile news figures.

THE PHONE-TAPPING SCANDAL UNFOLDS

2000-2004

In 2000, Rebekah Brooks (née Wade) was appointed as the editor of the News of the World at the age of 32, which made her the youngest national newspaper editor in Britain’s history. While there, Brooks oversaw the controversial campaign that sought to “name and shame” suspected pedophiles (McAlinden, 2005).

This later spearheaded the campaign for Sarah’s Law, which was in response to the murder of 8-year-old Sarah Payne in July of 2000. Sarah’s Law asked the government to allow parents of young children controlled access to the Sex Offenders Registry to see if a child sex offender was residing in their area.

In March 2002, another British girl, 13-year-old Milly Dowler, was reportedly abducted while on her way home to a suburb of London. In the days following her disappearance, News of the World hired private investigator, Glenn Mulcaire, to allegedly intercept the voicemail messages to Dowler’s cell phone, and then delete them to allow room for more messages. By doing so, the investigating police and Dowler’s family were given false hope that Milly was still alive. In September of 2002, her body was found and the missing person’s case turned into a murder investigation.

In early 2003, Rebekah Brooks became the editor of The Sun, and her former deputy, Andrew Coulson, took over as editor of the News of the World. A couple of months later, Brooks reported to Parliament that the News of the World had bribed police officers for information. However, News Corp denied this and said it was not in the nature of its business practice (Wells, 2003).

2005-2008

In late 2005, the News of the World published a piece on a knee injury of Prince William’s, and the detailed, confidential information led royal court officials to open a police investigation of purported voicemail interception.

By August of 2006, both Glenn Mulcaire, the hired private investigator, and Clive Goodman, royal family editor of News of the World, were arrested on charges of phone hacking, and were sentenced to six and four months of jail time, respectively.

By May 2007, while there was no formal evidence that Andrew Coulson, then-editor of News of the World, knew about the phone hacking, he resigned from his post claiming he accepted “ultimate responsibility” (Wells, 2011). He was soon hired as the Conservative Party’s communications director, where he reported to current Prime Minister, David Cameron.

In December of 2007, Rupert Murdoch’s son, James Murdoch, was appointed as the chief executive of the European and Asian operations of News Corporation.

2009-2010

Rebekah Brooks accepted the role as CEO of News International in June of 2009. That same month, her wedding was attended by former Prime Minister Gordon Brown and current Prime Minister David Cameron.

In the following month, News of the World was once again accused of intercepting the voicemails of both politicians and celebrities. Competitive British newspaper, The Guardian, reported that not only did the parent company know about the phone hacking, but it also alleged that it paid $1.6 million to settle the dispute regarding the hacking that could have harmed the company further (Bernstein, 2011). However, Scotland Yard, the Metropolitan Police Service of London, said there was not enough evidence to support the claims and close the case.

In May of 2010, David Cameron became the prime minister of the United Kingdom and hired former News of the World editor, Andrew Coulson, as his chief of media. In late September of that year, The New York Times wrote a story stating that, based on information from former News of the World reporters, Coulson actually was aware of the phone hacking that had gone on during his reign as editor. As a result of the scathing article, he resigned as Cameron’s media chief (Wells, 2011).

2011-Present

In January of 2011, Scotland Yard announced it was opening a new investigation of the phone-hacking practices of the News of the World based on reported new evidence. The, in June 2011, lead suspect Levi Bellfield was arrested for the murder of 13-year-old Milly Dowler, whose case saturated the pages of many British tabloid papers since her abduction in 2002 (Davies, 2011).

Subsequently, The Guardian wrote a story suggesting phone-hacking of not only Dowler, but also victims of 2005 terrorist attacks in London. By then, it was being reported that Andrew Coulson had actually been knowledgeable of the monetary bribes traded with police for useful information.

Finally, in early July, former Prime Minister Gordon Brown accused the News of the World of illegally getting a hold of his personal financial and medical records, including information on his disabled four-year-old son. Around the same time, Andrew Coulson and Clive Goodman were arrested (the second arrest for Goodman since 2006) on the charges of police bribery.

THE LEGAL BATTLE BEGINS

Murdoch’s Top Executives are Top Priority

On July 10, 2011, Rupert Murdoch flew from New York to London in an attempt to quell rumors on the rising scandal, and told reporters that his “top priority” was Rebekah Brooks. Certain critics believed Murdoch was neglecting the needs of the struggling journalists whose jobs were at stake, and instead focused most of his concern on the top executives at his company. “It’s very, very bad idea for a company to circle the wagons and try to protect its senior executives when they get into trouble” (Salmon, 2011).

The following week, Rupert and James Murdoch and Rebekah Brooks agreed to testify before Parliament. Insiders at News Corp. also revealed on July 18, 2011, the possibility of replacing CEO Rupert Murdoch with COO Chase Carey due to the public backlash of the phone-hacking scandal. The following day, Rupert and James Murdoch appear before a parliamentary committee and claim they were unaware of any of the phone-hacking.

During the committee hearing, a protester attempted to pie Rupert Murdoch with shaving cream, but his wife, Wendi Deng, counters the attack. The protester was later sentenced to six weeks in jail for the attack.

On August 10, 2011, the twelfth person of interest was arrested in the phone-hacking investigation, and Rupert Murdoch publicly came forth and claimed he was going to “do whatever is necessary” to prevent another scandal from tarnishing his company’s reputation.

On August 17, 2011, Rupert Murdoch’s son, James, publicly admitted to paying £700,000 to former professional soccer player, Gordon Taylor, as “hush money.” Rupert Murdoch continued to deny any knowledge of this.

Rebekah Brooks Steps Down

In early July of 2011, the press received wind of new evidence which suggested that at the time Rebekah Brooks was editor, the News of the World had tapped the phone of Sara Payne, mother of eight-year-old Sarah Payne, who served as inspiration for the “name and shame” campaign headed by Brooks in 2000. Because of Brooks’ reportedly close friendship with Mrs. Payne, this evidence was the final nail in the coffin for her.

On July 15, Rebekah Brooks resigned as the Chief Executive Officer of News International, and she was arrested two days later. On that same day, the highest-ranking police officer in the United Kingdom, Sir Paul Stephenson, steps down following the allegations of the police briberies. Prime Minister David Cameron was publicly upset by his resignation, but agreed it was the “proper” thing to do.

NEWS CORP DOES DAMAGE CONTROL

Murdoch Assembles a Star PR Team

Murdoch’s team of PR professionals included advisors outside of News Corp, including James Lundie and Alex Bigg of Edelman, and Steven Rubenstein from Rubenstein Public Relations in New York City. In addition, the News Corp’s strategic affairs officer, Matthew Anderson, and Joel Klein, who had once headed the U.S. Justice Department’s antitrust unit, joined were included in the crisis communications efforts.

In the weeks leading up to his court hearing, Murdoch’s public relations team met in London to create an opening statement that began with the apologetic mogul stating, “This is the most humble day of my life.” Those in court noted that Murdoch initially seemed over-prepared by his lawyers’ advisement, but eventually began to show more of his personality by pushing back at his accusers and speaking about ethics.

The PR team also suggested that Murdoch sit down with and apologize to the parents of murdered schoolgirl Milly Dowler, whose phone was hacked by reporters from the News of the World.

Murdoch Apologizes to the Dowler Family

On Friday, July 15, 2011, Rupert Murdoch met privately with Bob and Sally Dowler, the parents of murdered 13-year-old Milly Dowler, whose voicemail his reporters had illegally hacked, to personally apologize. He also agreed to a payout settlement to the Dowler family for £2 million in damages, and donated £1 million of his personal wealth to the family for them to donate on behalf of Milly. (Rayner & Hough, 2011).

During the sit-down, Murdoch allegedly apologized over and over with his head in his hands for the pain suffered by the Dowler family due to his company’s involvement in Milly’s police investigation. The Dowler’s family lawyer, Mark Lewis, was also present at the meeting and later told reporters that Murdoch’s apology was “full and humble.”

When asked later by reporters, Mr. Dowler commented that they could “forgive, but not forgive” Murdoch for his involvement, and that the charitable donation would be distributed to various charities in Milly’s name as a way of honoring their late daughter.

Afterward, as Murdoch emerged from the One Aldwych hotel in central London, where the meeting took place, he was bombarded by press and protesters shouting, “Shame on you!” When asked about his meeting with the Dowlers, Murdoch simply replied that there were still investigations being taken on the matter and that he had no further comment.

A Compensation Fund is Established

In April, 2011, after three employees of the tabloid were arrested, News of the World publicly apologized and established a compensation fund for victims related to voicemail interception between 2004 and 2006. Among those phone-tapped victims to be compensated were actress Sienna Miller, former Olympian and talent agent Sky Andrew, and publicist Nicola Phillips.

News Corp hoped each case could be individually settled for less than £100,000 (which converts to roughly $160,000 in the United States), and followed this announcement with an extensive internal investigation and disclosures through civil cases (Peston, 2011).

Murdoch Pays for Apology Advertisement

Perhaps Murdoch’s most interesting mea culpa was preparing a full-page advertisement expressing his remorse, and paying for it to appear in a bevy of United Kingdom newspapers.

In the ad, Murdoch wrote, “We are sorry. The News of the World was in the business of holding others to account. It failed when it came to itself.”

The ad expressed that he was aware this issue was not going away any time soon. “I realize that simply apologizing is not enough,” he wrote, “In the coming days, as we take further concrete steps to resolve these issues and make amends for the damage they have caused, you will hear more from us.”

Some critics did not take too kindly to Murdoch’s attempt at apologizing, with writer Felix Salmon even stating, “From the what we’ve seen from Murdoch and his top executives is lies, obfuscation, pushback, bluster, dissembling, and generally the unedifying spectacle of extremely rich and powerful people doing their very best to never be called to account” (Salmon, 2011).

News Corp Issues a Press Release

An official News Corp press release was made public on July 6, 2011, with Murdoch stating, “Recent allegations of phone hacking and making payments to police with respect to the News of the World are deplorable and unacceptable.” He tried to emphasize his compliance with the ongoing police investigations by adding, “I have made clear that our company must fully and proactively cooperate with the police in all investigations and that is exactly what News International has been doing and will continue to do under Rebekah Brooks’ leadership” (Macandrew & Everett, 2011).

The press release was more defensive than apologetic in regard to the scandal, but did point out measures that were being taken by News Corp to repair the situation. “We are committed to addressing these issues fully and have taken a number of important steps to prevent them from happening again,” Murdoch stated, “I have also appointed Joel Klein to provide important oversight and guidance and Joel and Viet Dinh, an Independent Director, are keeping News Corporation’s Board fully advised as well.”

News of the World Shuts its Doors

Because of the public outcry and struggling advertising sales, on July 7, 2011, James Murdoch announced to the public that News of the World would be ending after its final publication on July 10. “The newspaper business is all about selling readers to advertisers, and the News of the World suddenly had many fewer of the former and almost none of the latter. It was toast” (Salmon, 2011).

To make matters worse, by the beginning of September it was announced that News International, the newspaper publishing division of News Corp, was preparing to cut roughly 100 jobs across its British newspapers.

THE FUTURE OF NEWS CORP

Although News of the World was only one piece of the media mogul’s giant news empire, many critics wonder if News Corp will ever fully recover from its tabloid scandal. As recent as November of this year, many publications have examined a rift in the father-son relationship between Rupert and James Murdoch. “That rift, which has been known only to those close to the company, has opened up a question central to Rupert Murdoch’s legacy – can one of his children ever take the helm of his $62 billion media giant?” (Peters, 2011).

At the annual News Corp shareholder meeting in October 2011, Murdoch, who has always dreamed of passing on his news dynasty to children one day, was faced with the reality that shareholders are reluctant to pass on the torch to a new generation of Murdochs given the mogul’s controversial judgment.

Britain’s Financial Times noted, “There is no doubt that Mr. Murdoch has drive and talent as an entrepreneur…but there is an honourable tradition of family ownership in the media sector as a way to preserve editorial independence and permit the long-term investment businesses need” (Financial Times, 2011).

The hacking scandal highlighted the issues that can arise when family members are put in top-level positions. Had James Murdoch not been the son of the corporation’s leader, he would have likely been out the door as the scandal gained media heat.

Rupert Murdoch’s distinct personality has defined his company since its start. He has exhibited his combative business nature and willingness to go to great lengths for a good story. It is possible that once he is gone, News Corp may just become another media conglomerate. However, given the recent scandal and highly-publicized, negative press, that may be exactly what this organization needs.

In 2011, it was proven Murdoch and his company did not suffer from the phone hacking scandal. The company’s revenues rose two percent to $33.4 billion, while adjusted operating income increased 12 percent to $4.98 billion. He was quoted saying in a letter to his stakeholder, “We are generating strong cash flow; we have the most robust balance sheet in our history; and we are successfully executing our strategy to expand our wildly popular content into even more countries and onto more platforms.”

Nonetheless, the future for News of World is promising , RupertMurdoch said, “However, I am optimistic about the future because I believe that News Corporation – the most global of media companies with the most compelling content – will continue to shape it. We are better positioned financially and operationally than we have ever been. Our culture is, and always has been, entrepreneurial. As we proved this past year, News Corporation is not the kind of company – and we are not the kind of people – to fear a changing market.”